Boeing and Embraer to agree on the terms of strategic partnership

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Sao Paulo - Boeing and Embraer confirmed the terms of the strategic partnership that worth $4.2 billion. The manufacturers are now waiting for the green light to start.

On December 17, after a few judicial and political developments, the American and Brazilian aircraft manufacturers concluded negotiations. Boeing and Embraer agreed to form a joint venture that would allow both companies to compete better in the global aerospace market.

The agreement governs the creation of a joint venture, including Embraer's commercial aviation and services, in which Boeing will own an 80% interest and Embraer the remaining 20%.

Once the transaction is finalized, the new joint venture will be led by a Brazilian-based management team headed by a president and CEO. Boeing will exercise operational control and management of the new business, which will report directly to CEO Dennis Muilenburg while Embraer will retain consent rights for certain strategic decisions such as the transfer of business out of Brazil.

The sides believe that this strategic partnership will create a highly complementary product line for the market. Their joint portfolio will include passenger planes from 70 seats to more than 450 seats including freighters.

Boeing declared its desire to take control of Embraer's commercial aircraft in early July, just five days after the finalization of a similar agreement between European aircraft manufacturer Airbus and Canada's Bombardier for CSeries (currently A220) program.

A joint statement recalls that this transaction is subject to the approval of the Brazilian government. Once approved, Embraer and Boeing will sign the final transaction documents.

This new deal is expected to have a neutral effect on Boeing's earnings per share for the fiscal year 2020.

The two companies have also agreed on the creation of another joint venture to promote the Embraer's KC-390 multi-mission transport aircraft. Under the terms of the partnership proposal, Embraer will own a 51% stake in the joint venture, and Boeing the remaining 49%.